Covid takes a toll on dairy sales
Demand for milk plunges sharply
The 21-day lockdown has drastically reduced milk sales as bulk consumers such as hotels, restaurants and cafes (HoReCa) across the country have shut down and inter-State movement of dairy products has stalled.
The largest player Amul has witnessed a 25 per cent dip in sales, while the Karnataka Milk Federation (KMF) — the second largest milk co-operative in the country — has seen a slump of about 30 per cent. Private players in some States have seen a sharper decline of up to 40 per cent.
Drop in demand
“The HoReCa segment demand has dropped drastically. People’s departure from big cities to rural areas caused the drop. We believe, going forward, the overall consumption will remain lower by about 10-15 per cent from the normal,” said RS Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells milk products under the Amul brand.
KMF, which has seen sales drop in Maharashtra, Tamil Nadu, Goa, Telanagana and Kerala and also in Bengaluru, is saddled with a surplus of about 10 lakh litres a day (LLPD) of milk, which it plans to convert into skimmed milk powder, said Managing Director BC Sateesh.
KMF is now converting about 22 LLPD into SMP from the normal 15-16 LLPD. KMF procures about 68-70 LLPD, of which about 40 LLPD is sold as liquid milk, UHT milk and curd. “We have seen an increase in procurement by about 2 LLPD after this crisis as private players have stopped purchasing in the border districts of Kolar and Belagavi,” Sateesh said.
The Indian dairy sector is largely dominated by unorganised players. However, in the organised space, co-operatives command a 60 per cent market share, while the private sector accounts for the rest. The country’s annual milk output is estimated at 188 million tonnes for 2018-19.
The private sector, too, has witnessed a sharp dip in consumption. Hatsun Agro Chairman RG Chandramogan said the dairy sector is going through a demand destruction situation.
“The demand has dipped in the range of 20-40 per cent depending on the players. Obvious reasons are the shutdown of bulk consuming establishments (hotels, etc) and impact on informal sector employees. It is also due to movement restrictions between regions and States. There is demand for dairy products in metros and other regions, but manufacturers aren’t able to transport due to restrictions. We are seeing demand destruction in the dairy sector,” he said.
Though the excess milk gets diverted to SMP, there is no certainty when the markets are going to open, Chandramogan said. “So, SMP can’t help because the reconstitution of milk is not happening. The demand (from confectioneries, ice cream makers and HoReCa) is lesser-than-the-required for milk to get reconstituted. So, there is panic among players to buy more milk,” Chandramogan said.
Parag Milk Foods Chairman Devendra Shah said, “The milk consumption has dipped by up to 40 per cent and there is no optimism about SMP demand any time soon. Additionally, we are also facing supply chain and distribution challenges, including for packaging material, fuel, and distribution of products.” He added that many private players are diverting their liquid milk to make ghee (clarified butter), paneer and cheese.
On the other hand, milk output has increased in recent weeks despite the onset of summer. Summers are known for lower milk production by the animals. The milk flush, when the lactation of a milch animal peaks, was delayed this year because of the extended monsoon last year.
Source : thehindubusinessline